tv Fast Money Halftime Report CNBC September 30, 2015 12:00pm-1:01pm EDT
in her view, some of the volatility. they said it has been priced in. we will see. of course, we're closing out the quarter. nice morning rally. it's fading as we speak. we're up about 160 points on the dow. that's well below session highs. we did get some bearish oil inventory numbers. we'll be watching the afternoon session. let's get back to the judge with icahn and the half. >> carl, thank you so much. welcome to "the halftime show." by now you know about carl icahn's warning of danger ahead. we'll speak to him live in just a few moments about his much talked about video. first, the final trading day of the third quarter. stocks bouncing. the question is where do we go from here? is this the start of a bear market? josh, you write in a well written column, i might add, in "fortune magazine" are you ready for the next bear market? is that what this is? >> well, you know, i think it's important to point out that it
very well could be. i still think there's a lot of denial about the fact that we're even in a serious correction. it would take about 11.5% gains on the s&p from here just to get back to the peak. i think what fools people, scott, and i think what engenders some of the worst investment behavior is looking at the day to day market action and drawing a conclusion as to whether you want to be risk on or risk off. that's really, really bad investing. we're about to give you a statistic that illuminates that. if you look at the market since the peak in may, that's 93 days ago. on 21 of those days, the stock market, dow jones, has been up triple digits. on each one of those days, you know, the tend answer where i is to say we're rebounding. this is the rally. we're still in a correction. the peak to 12 so far has been 12.5% from the high on the s&p.
zoo say every day you endure it, you're erjing the long-term returns that not all investors are the stomach for. that makes you the winner of a game that many others consistently lose. >> that's correct. if you look at a fund of 20 or 30 year retirement, you are not going to do it with a stable amount of dollar units. >> you don't get it for free. you have to deal with markets looez like these. the key is we're going to have drawdowns, but they're not the end of the world. if you look at the period between, let's say, april and july of 2010, that was a 17% drawdown on the s&p. wasn't the end of the world. look a year later. 2011. april to october. that's a 21.5% drawdown on the s&p. the world didn't come to an end.
if we're down more than 10% right now, the message is not to abandon your portfolio. it's to grit your teeth and understand this is part of the game. >> pete, many have come on the air over the last many days, many weeks, and said the bull market is not over. this is just a correction within a longer term bull market. >> right. >> you believe that? >>. >> is the fed going to do something? union? no. or something in september? >> i was one of the folks that bought into that area. they did not. now they continue to talk about, well, but we still think it will happen before the end of the year. well, maybe it does. maybe it doesn't. i think the most important thing, though, scott after reading josh's article that it's going to be in "four tune" very interesting article and compelling points on a lot of sharp things. i think the most important thing that comes out of that article for me is after years of being on the trading floors in chicago you have to use volatility as your gauge. we talked about probably the first six or seven months of this year with the exception of one or two blips.
low volatility. buy protection to have that to the down side, whether it's directly in those stocks or through different etf's. they'll give you that protection. now with the volatility now in the marketplace, up in the mid 20s, all the way from somewhere towards that 12 level, when you look at the mid 20s, i think that creates another opportunity, which is to be able to sell premium against positions that you have got on. >> if i could just echo what josh said because he said it so well in the article and just now. you want to be aware of what the market is doing, and if there's a significant, significant change in something in the markets, then i guess you could get a larger percentage of your assets to the sideline, judge. in other words, cash or some
alternative. i think those that throw out the baby with the bath water, when they get out at big sell-offs like the 1,000 pointer we had august 24th, i think that's a mistake. adding to positions on big rallies, also a mistake. >> do we have a surprise between now and the end of the yeesh that you get a decent size rally? there are plenty of people that have price targets that are still somewhat aggressive relative to where we are now and are sticking with it thinking that once you get a little bit past this turbulence and these waves, then you could have a move here. >> historically october is a bear killer. we've had some major bottoms happen in october. we tend to rally into year end. that's a historical pattern that's fairly significant. it doesn't mean it happens every time, but it shut not be ruled out of the equation in terms of
things that are possible. >> we're looking for the best opportunity. like pete said, always having protection. it can be, you know, for those that understand how to do it, a prudent way to go about it. not for those who don't. >> i hope we're looking at more than just a day. >> we are. we are. but i don't hold positions for years. pete occasionally has some positions he has held for years. i don't hold anything for years. not brookshire hathaway, nothing. i add to the market every month on a monthly basis. i don't take out right now because i'm not of the age where i need to, and i think overall when you ask me what would i be looking at fourth quarter setup, i would look at consumer constructionaries. still up there on my list with amazon top of the list, best buy, companies like that.
>> they're keeping the china growth forecast intact at least for now. maybe shft wins subside. >> i think it's a fed factor. josh was talking about october being one of those months where you oftentimes bottom out and rally into the rest of the year. well, i think the fed factor really comings into play here as well. if we see rising rates, i think that spurs a couple of things. one of them would be jobs. one would certainly impact housing. specifically, i think the financials. when you look at citi, trading 49, you look at jp morgan trading underneath 60, goldman sachs trading 171 yesterday. you look at morgan stanley at $31 a share. these names have all been bludgeoned and are down where they were or lower in some cases, most cases, even lower. i think the fed does raise
rates, which i believe they will before the end of the year. i think that's the place to be. financials will lead us out. >> coming up, carl icahn unplugged on the danger ahead video. the billionaire investor joins us in a first on cnbc interview. we discuss the markets, why he made that video in the first place, and whether he is endorsing donald trump. you're watching cnbc, first in business worldwide. this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it. chase for business. we heard you got a job as a developer!!!!! its official, i work for ge!!
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. we are back. taking a look at what the markets are doing. here's the end of the quarter. final day. there's your market picture. pretty strong rally on the street. the s&p is up 1%. the dow is off its best levels. all the major averages for that matter. there's the nasdaq and the russell 2,000 and what's been a pretty difficult quarter for the markets. the russell down 12.5%. that's the picture at this hour. let's do our trader blitz. three trades on three stoux making news today. first up, you get western dig. gets a 3.8 billion dollar investment from china. >> this one looks like a five-year lock-up on shares, and they'll put up their own board member. price action-wise, if you are long this name, you were just handed a gift. i suggest you take it. the stocks should be sold. the minute it hit that 50 day moving average, it got smushed back down. nobody really wants to own this thing. take your profit and walk away. >> squawk board, pete, has been
active and really successful. >> they talk about substantial value there, and they also talk specifically they go right after margins. they look at the competitors and see the margins could be improved. they are talking about the stock could be $350 stock. even up to a $400 stock. >> they'll be putting out the entire map. looks like people are buying in. >> stays exit for ralph lauren. >> well, turning over the reigns to somebody who is just very highly thought of. >> this guy has been taking over, is the guy that had old navy and had done a fabulous job there. they're under gps. gap stores. when you look at that is correct the two stocks going in opposite directions, rl was basically at the 52-week low when they made this announcement.
it has made a nice 12% pop on triple normal volume. you look at gap stores. it's down hard on double nrm normal volume. >> okay. coming up, following his warning to investors that danger is ahead. carl icahn joins nuss a first on cnbc interview worldwide. we'll talk earnings, the fed, the markets. much, much more, and that is next.
in a new video this week billionaire investor carl icahn warns of danger ahead laying out several things he is worried about, including bubbles caused by fed policy and dysfunction in washington. here to talk more about the video and where he sees the markets in the months ahead is mr. icahn himself. mr. icahn, welcome back to the ram. it's good to have you on toted. >> thank you. glad to be here. >> i would like to ask you a question that i've been asked myself over the last few days, and that is why did you make this video in the first place? >> you know, i feel that -- i found it sort of interesting and enjoyable that, you know, to -- this is how it really started by talking more about some stocks.
>> when i see a now brainer and can talk about it, such as apple, we recommend it. i don't use that word. we don't recommend stock. but mentioned why we thought it was a no brainer. that's how i have invested all my life. we're almost instinctively -- you get it on the back of an envelope. we do a lot of work to understand the company, but then in the end you see that it's almost ridiculously underpriced and so we talk about apple and 234e9 flicks, and then it occurred to me, and it occurred to me actually in 2007 how in certain cases the public is really going to really in my opinion get badly hurt, and i felt that way a bit in 2007 and talked about it.
>> i think that we are really in a bubble, and the middle level investor and even some of the pension funds are really buying very dangerous securities. i just thought i would do it, and it's really as simple as that. i'm going to do more of this. i've gotten to a point where i think people do listen to me a bit, and i'm going to do it more. >> so you lay out a long list of things that you're clearly worried about. what do you say to some of the critics out there over the last couple of days who say that you're overly alarmist? maybe in part to benefit some of your own positions in the way your positioned in the market today being short high yield and things like that. things you have spoken out about for the last many months. how would you respond to that? >>. >> i think i would be more criticized if i wasn't short the high yield market. here i am saying the high yield is way overpriced. how about apple?
when we tell people to buy apple, if i didn't own it, wouldn't you say i'm sure you would criticize me, scott, and say, well, how come if you think apple is so great, why don't you own it? >> i don't think any going out and talking about that really does move it very much. it's not like some is stock that you go out and try to push, right? >> i think earnings are misstated. it's sort of a mirage. you know, we talk about these earnings, and i sort of marvel at listening to all these analysts that sort of drink the cool aid. they keep saying the s&p is $120
a share. it's really not $120 a share in earnings. take out all these intangibles that everybody just accepts now, and it's down to $100. i noticed the pharma companies are final getting hit. >> they don't advertise. you know, forget gap. we shouldn't have to advertise that. i would like to understand why. you say let's just forget it. it's sort of a complete mile an hourage in many ways, and i do think that the earnings of the s&p are way wroefr stated. even gap is questionable in many areas. you know, sometimes you have a one time write-off in gap, and you say, well, built that cap back.
>> if you are trader sxushgs want to make a fast trade, you can buy them here and there, but i think that's a no brainer. i think one day the risk there is certainly not worth the reward. >> if you aren't willing to say whether we're in a bear market or not. >> i don't know what the word means. >> 20% down, and you stay there for a considerable period of time, then the bull market, this ride that we've enjoyed for the last six years thoor long investors have enjoyed at least is over. >> i think that fits what i
believe, yes. >> i think that the joy ride is over. in my presentation, you know, you could squeak that to my websi website. >> i think it's going to go over that cliff to some extent with the high yield mostly and the etf's. i don't think you can have another 2008. i don't think the banks are in any trouble, thank god. i think the volcker rule is great because it won't allow a meltdown of your sister. in 2008 i was scared the whole damn system would fall off, and that won't happen again. what i do think can happen is is it very dangerous territory. now, again, scott, i'm not telling you, oh, go short everything tomorrow.
i don't know that. >> i think it's possibly, especially sent off by the high yields because the high yields for many reasons too many companies borrowed. some won't be able to pay back. they have very poor covenants. they -- i think it really is -- this is the real fair part. there's no liquidity for them. people think there is.
>> i am not here to advise on trading. >> i think many smart investors have talked about bond market liquidity. some of the issues that you have raised yourself and i think everybody is kind of in agreement that maybe the plumbing there needs to be worked on better for some of the issues that you raise. let me do this, if you would, carl. i want to take a quick break. i want to come back on the other side. i want to talk to you more about what you are particularly worried about and then let's talk some stocks as well. back in after this quick break with carl icahn.
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welcome wack to the halftime show. rejoin now by billionaire investor carl icahn. during this break this past commercial break, that we just took, we got a tweet from one of our viewers asking what the individual investor is supposed to do here. if are you warning of danger ahead, if you think we're headed towards some kind of catastro e
catastrophe. >> i just thought we would see certain things that i thought were obvious and should be shared. i think that. >> i -- you know, i don't do this because, you know, i am in and out. got more hedges going on. stwroo over the years i've been bullish and bearish. i say, you know what, you are only making 1% on your cash.
what's better. making 1% or losing 30%. that's really the question you should ask yourself. if you are willing to take some risks and you are willing -- i mean, i would only take money invest in the market, especially today if can you afford to lose, say, you really can't afford to lose another 30%, 40%, and grit your teeth and then live with it and not have to be forced out in a margin call or get nervous. you have to have that temperament. you know, after years and years of doing this, i'm -- i can lose a great deal of money for a week or a month, and it doesn't bother me at all. you know, i mean, it's just strange how little things bother me. but not that. i think apple even in a bear market. it may hurt. it may go down, but i think apple is still ridiculously priced.
>> have you used that opportunity to buy more? >> i really will tell i don't want to discuss what, you know -- what i'm doing day to day. i certainly have all the stock. you'll see that. we haven't basically changed the position. i would be buying much more if i weren't concerned about the market. >> right. >> that's the only reason that i don't. i think long-term this is one of
the the. >> he find it interesting that you raise that as a great concern of yours when you, yourself, wanted am to use the low rates to borrow money and then buy back stock. i would like you to respond to that. i want to read you something that cnbc's own rick santelli said on the air yesterday, and i would like you to respond to that in a great question. rick santelli said carl has milked the cow. now he wants to take it to slaugh. how would you respond? >> i don't quite understand metaphor.
now i want to take it to where? >> the premise being that you have argued that companies. >> i think i have been very definite on this. let's say you are a young gri, and you want to run the marathon. go do do it. you wouldn't tell me to run the marathon. certain people can do it, and certain can't. there are companies that should buy back their stocks. apple is the perfect example.
>> i'm hoping that the laws will go through, and that will be a great thing for apple. i would be criticized for saying when you want -- you want to change the law because it's going to help apple. it's good to help the whole country too. >> you can go to companies that are -- we got on the board of forest labs. it went to 99 from 43. we're hope to say that what we're doing in recommending this change in the law would be great for this country. i've been an activist, but that doesn't mean that you can't say, yeah, you're going to benefit from it. let's take saying edison benefitted from inventing the light bulb.
give all this money to charter schools. he did it because his daughter might want to be a teacher. meanwhile, which is not true anyway, but what i'm trying to tell you is that most of these companies that buy back stock are making a huge mistake. the take of all this is in most of the companies i have been in -- i saved motorola -- i stopped them from making takeovers and using their $3 billion to buy another company. you can't paint me with that brush. apple would benefit if there's -- >> i would like to buy more of your stock, and i would be saying that. i think it will benefit apple. that doesn't mean i should go and say this is good for the country. this is something that should be done for all our companies that
have money abroad. this will create jobs. i mean, i could go on and on. these criticisms are ridiculous. i mean, and i certainly -- >> let me ask you about a couple other companies. i think a lot of people were surprised when they heard about your pretty large investments in both freeport mcmoran and -- certainly in the light of what you are sort of world view and your greater market view. >> i think the no brainer is apple. no brainer is the -- i am not saying a no brainer is buying a commodity company. you have to have a certain temperament to that.
were you willing to buy things when they're down like this? like freeport, like a commodity company and be willing to go in and take this as a golden opportunity to buy. i do belief it's three and four years looking ahead. i know i'm getting old, but this is what i have done all my life. buy them when nobody wants them. buy them when they're throwing them on the fire, and then put them away and don't worry that they go lower. in fact, be happy they go lower so you can buy more of them. free fort is that example. copper i think will turn and come back to us. >> you have had very low interest rates. what happens is a company that manufacturers a commodity, while mine is copper, loves to mine copper, and if you can borrow money cheaply, and they think the world has been staying that way for years, they go in and
reduce too much. they're producing too much copper today. that he that's one example, or iron or on oil or natural gas. they're producing too much. this gives you an opportunity. when you reduce too much, it's sensitive when you produce too little or too much of a commodity, the stock sometimes falls apart. >> it could go lower, and you have to say, oh, i'm almost glad it's going lower so i can buy more. i'm not talking against what i just said. >> sure. >> i think that you could still have a bear market and ease up. i think you'll look back in three years and say, holy, i could have bought that oil, i could have bought that copper. that doesn't mean.
>> i think it's a different way of looking. >> with freeport, specifically, literally, what are your intentions here? people are expecting the icahn they know to get involved here in some way. >> i think they're right to expect that. i don't really want to go into any more about it. >> when i get involved, i'm an activist, and a lot of companies do lend themselves to activism. auz mention, freeport these companies have not good corporate governance observers, and that's about all i'm going to say about that. that doesn't mean that you should -- well, sheneer is a different story. >> let's take another commercial break, get a glass of water, and
>> i can't get into the nitty gritty, but i think cheniere is misunderstood. it's painted by the brush of energy companies. i think cheniere has a lot of contracts that i think are very solid. it is price isn't that important because these contracts are there, and if you do the numbers on it, and i'm not -- i'm just trying to remember it because i think you make very good -- even if natural gas -- if oil stays down, obviously if oil goes up, you make more on your l & g to some extent, but about 80% of their production is spoken for anyway.
>> if oil goes up, there will be a greater demand for it obviously. to me it's sort of a no brainer. you buy it here. you have to -- it's not riskless in that you have to believe in those contracts. i know i think it was yours where he says you should short it, and he is a bright guy. i know him for years. i haven't spoke to him lately, but, i mean, it's different opinions on it, but i just th k think. >> calls it a looming disaster. that's what he said on this network. >> i think he is talking generally. there are some that might be a looming disaster, but i would like to ask him, and i really could call him. i respect the guy. i know him for years.
again, it's like all these things. some that are and some that aren't. i don't understand why you would say that cheniere is not -- when they have these contracts. we pick the contracts. >> if we're wrong there's a risk reward ratio. there's a very good rather than wroe, because i think that you're pretty solid in getting returns there from 10% to 14%. now i think one of the things that overshadows a little bit is they're going to dividend all of that money out, and i know one of the arguments is the ceo says you is not promising that.
being that said, i will tell you, you -- and i can't say more than this. if you alluded to the fact i'm an activist. you could deduce from that whatever you want. you know? >>. >> i think i know where you are going. it's pretty leer. >> let me ask you within more stock question. chesapeake cutting 16% of its work force. you are still in the name, and what are your thoughts? >> we're in the name. lo look. >> when you get this tsunami, we don't micromanage them at all, so i'm not certainly involved in the cuts or even advocating. he is doing what he has to do as a good ceo. i find that as an operator, you
know, we've had certain disagreements on some of the financial matters there, but has an operator, he has done an excellent job. you know what's going on in the energy sector as well as energy. it's under a lot of pressure, and that's why -- i'm not telling you to buy chesapeake or anything like that. i'm just saying that doug is doing what he has to do. >> understood. let's talk some politics. >> sure, sure. >> you told me you agree with some of the things that donald trump has said. you disagree with some of the things he has said. are you endorsing him for president? >> yeah. i am. >> you can't keep it going the
way it is. it's not that they're bad people. it's not that they're not bright. i don't think they even understand that, you know -- i was listening -- i am not against any of these guys. i think they're bright people, but one of them, i think, is saying, hey, look, we stand for limited government, and, you know what, they don't quite get that you don't have limited government today. you have an extremely strong federal reserve -- on the one hand you're saying we have to watch the deficit and all these tea party guys. oh, we can't spend money. they don't look around right next to them that the fed in the last few years has gone out and printed up $4 trillion on their balance sheet. their balance sheet has gone from $800 billion to $4 trillion. where did that money go? >> that is to buy treasury bonds. they say you don't have a government that's very, very
involved in this economy, and zero interest rates, my god, they've been there for seven years. what the hell is that? that's not limited government. in fact, you need a guy in there that understands business and understands that kind of thing and understands the risks in what the federal reserve is doing. i'm not saying these people in the federal reserve are -- i think a lot of them are smart. by the way, the federal reserve is divided. they should have raised interest rates a year ago. they have built themselves into this real problem they're talking about. >> i'ming going to -- let's do a quick commercial break and come back. i want to ask you a few more things about donald trump, whether you think he can actually win or not. don't answer yet. we'll come back on the other side. more on carl icahn.
we are back with the investor carl icahn. so, carl, do you think donald trump can win? >> yeah, i do. i think he has a good chance. obviously there's a lot of candidates there, there's a lot of mountains to climb, but i do think he has a chance because he is sending a message to the middle class, and literally how screwed they're getting, and they are. in many respects -- i mean, how do you justify mediocre ceo making $42 million a year and the guy who is working for him out there really doing the work is getting $50,000 a year. i mean there's no justification for it in a free society when you can just vote. listen, in feudal times or even in czarist russia, you'd kill somebody who wanted to start a revolution and unseat you. here all you have to do is vote. i don't know why anybody wouldn't vote for somebody with that message. >> are you advising him on the
economy? >> well, yeah. i mean, he and i talk from time to time -- well, we talk, and, yeah, i do tell him what i think, and i think he respects it. look, he's a very open-minded guy and he listens to people. he's got a strong ego, believes in himself and he's willing to listen. there's more than you can say about a lot of presidents we had. i think it's important to surround yourself like in any area, you know, i have businesses, okay? and in these businesses i look for a guy that knows that business, that has lived it and understand it. i don't micromanage it. just like doug at chesapeake. i don't go in and say i don't think you should fire people, i do think you should. we don't do that. i should talk to doug and we have some disagreements over financial matters over there, but i certainly would never presume to tell him what to do and that's what you need to government, too. instead of surrounding yourself by a lot of, you know, people that are just going to say you're doing the right thing, you're great, you surround yourself with people that will, you know, have some controversy
with you and listen to you, and i think the great presidents did that. but here you need somebody that's going to go in, take on, by the way, the bureaucracy and end corporate governance and have true elections and make ceos accountable. you have some good ceos but for the most part they're not. that's why you have this bubble. you have to find somebody who will stand up to the business round table and the chamber of commerce and say we want our companies to be run better and you need somebody in government that can get the laws changed and get something moving. i mean, it's absurd not to have repatriation. i mean, even the politicians i talk to all say you should do it. hopefully they will be able to do it before the end of the year. i'm saying that's why i think trump has a shot. >> he's mentioned you as a possible treasury secretary. are you going to washington if he wins? >> i have said ten times i would never do that, but i would certainly be there to advise him
if he wanted it and to help in any way i can, but i would never consider going to washington and doing that. i mean, that's -- that's not going to be this time around. >> maybe in your next life. carl, we'll leave it there. that's probably a good place to end this conversation. thanks so much for spending the last 45 minutes with us. we appreciate it very much. >> okay. good talking to you again, scott. >> likewise. carl icahn. coming up, three hours left inned trading day. we'll come back from a quick break and set you up for the second half. you pay your car insurance premium like clockwork. month after month. year after year. then one night, you hydroplane into a ditch. yeah...
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pete, your reaction to what you heard? >> i think the most important one was we had some put activity in freeport. they were going to january and then carl had this disclosure he's got a significant position there. carl is talking three and four years out, and i think that's something that everybody always
has to understand. he talked about this name, how much he likes this name, but he would almost hope for it to go lower because it's a longer term play and i think that's the most important thing. people will be very critical of him if this stock moves to the downside from here. that's when he's going to step in and buy more. >> john? >> it's interesting that we didn't really get to talk much about ebay and some of the spinoffs he was behind as far as the pay pal spinoff. that's got me interested still and i'm looking to maybe get into that. >> his idea of sort of where we are, that the party essentially is over. this party that investors have enjoyed for the last six years fueled in part and that's going to be hotly debated for the next dozens of years on fed policy. >> mr. icahn is right to be pointing attention toward and looking at the junk bond market. there's a not terrible correlation between what happens with spreads and then what ends up happening with the stock market. and we haven't really had default spike in junk bonds but we're looking at four straight
months of declining in the index, and i think it's, you know, definitely something that should be on everyone's radar. >> all right. that does it for us. you've got the markets off their best levels of the day this final day of what has been a very rough quarter. "power lunch" picks up that story now. >> okay, everyone to "power lunch." along with mandy drury, i'm tyler mathisen. a bullish end as scott just pointed tout a very bearish month and a very bearish quarter. the average is posting their biggest gains today in three weeks though they are, as scott mentioned, a little off the high, but it is nice on this last day of september to see some green numbers in the column. the dow, s&p, and nasdaq all down more than 7% in the third quarter. there you see the graphic. look at that. is there a fourth quarter rebound ahead for equities? we'll ask mo